Risk Management and Inter-Bank Dealings · RBI/2026-27/293
RBI notification RBI/2026-27/293 · 12 Oct 2026
Summary
Check the official recordWhat changed
The Reserve Bank of India restricts the offer of non-deliverable derivative contracts (NDDCs) involving INR to non-resident users. Authorised Dealers now offer these contracts only for the purpose of hedging. Authorised Dealers must maintain a Foreign Exchange Risk Reserve (FERR) for foreign exchange derivative contracts involving INR that hedge the currency risk of their own assets and liabilities. The FERR applies to contracts where the Authorised Dealer purchases foreign currency against INR. The FERR amount equals 20 per cent of the INR equivalent of the notional amount of each contract. Authorised Dealers deposit the FERR as cash with the Reserve Bank on a daily basis until contract termination. These directions apply to contracts undertaken after October 12, 2026.
What you must do
- Offer NDDCs involving INR to non-resident users only for the purpose of hedging.
- Maintain a Foreign Exchange Risk Reserve (FERR) for foreign exchange derivative contracts involving INR used to hedge currency risk of own assets and liabilities.
Document text
RBI/2026-27/293 A.P. (DIR Series) Circular No. 27 October 12, 2026
To, All Authorised Dealers
Madam/Sir,
Risk Management and Inter-Bank Dealings
Attention of Authorised Dealers is invited to Master Direction - Risk Management and Inter-Bank Dealings dated July 05, 2016, as amended from time to time.
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In terms of Para 2.3 (iii) of Section I of Part A of the Master Direction ibid, Authorised Dealer Category-I banks with an operating IFSC Banking Unit and Standalone Primary Dealers authorised as Authorised Dealer Category-III may offer non deliverable derivative contracts (NDDCs) involving INR to non-resident users without any restriction in terms of purpose. On a review, it has been decided that henceforth, Authorised Dealers shall offer NDDCs involving INR to a non-resident user only for the purpose of hedging.
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Further, it has been decided that:
- An Authorised Dealer shall be required to maintain a Foreign Exchange Risk Reserve (FERR) for foreign exchange derivative contracts involving INR undertaken by it for hedging the currency risk of its own assets and liabilities;
- The FERR shall be applicable to all foreign exchange derivative contracts involving INR where the Authorised Dealer is purchasing foreign currency against INR;
- The FERR shall be equal to 20 per cent of the INR equivalent of the notional amount of each derivative contract; and
- The FERR shall be deposited and maintained by way of cash in India with the Reserve Bank on a daily basis and shall be maintained until the termination of the contract.
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These Directions shall be applicable to foreign exchange derivative contracts undertaken after the issuance of these Directions.
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These Directions are issued in exercise of the powers conferred by Sections 10(4) and 11(1) of the FEMA, 1999, and Section 45W of the Reserve Bank of India Act, 1934, and are without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully,
(Dimple Bhandia)
Chief General Manager
Source details
- Source
- Reserve Bank of India
- Type
- notification
- Published by source
- 12 Oct 2026
- Document number
- RBI/2026-27/293
- Issuing division
- Reserve Bank of India
- Effective date
- 12 Oct 2026
- Coverage area
- banking